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Joiners, leavers, stayers and abstainers: Private health insurance choices in Australia, CHERE Working Paper 2007/8

Author

Listed:
  • Stephanie Knox

    () (CHERE, University of Technology, Sydney)

  • Elizabeth Savage

    () (CHERE, University of Technology, Sydney)

  • Denzil Fiebig
  • Vineta Salale

Abstract

The percentage of Australians taking up Private Health Insurance (PHI) was in decline following the introduction of Medicare in 1984 (PHIAC). To arrest this decline the Australian Government introduced a suite of policies, between 1997 and 2000, to create incentives for Australians to purchase private health insurance. These policies include an increased Medicare levy for those without PHI on high incomes, introduced in 1997, a 30% rebate for private hospital cover (introduced 1998), and the Lifetime Health Cover (LHC) policy where PHI premiums are set at age of entry, increasing for each year older than 30 years (introduced 2000). In 2004 the longitudinal study on Household Income and Labour Dynamics in Australia (HILDA), included a series of questions on private health insurance and hospital use. We used the HILDA data to investigate the demographic, health and income factors related to the PHI decisions, especially around the introduction of the Lifetime Health Cover policy. Specifically we investigate who was most influenced to purchase PHI (specifically hospital cover) in 2000 as a response to the Lifetime Health Cover policy deadline. Are those who have joined PHI since the introduction of LHC different from those who joined prior to LHC? What are the characteristics of those who have dropped PHI since the introduction of LHC? We model the PHI outcomes allowing for heterogeneity of choice and correlation across alternatives. After controlling for other factors, we find that LHC prompted moderately well-off working age adults (30-49 yrs) to purchase before the 2000 deadline. Young singles or couples with no children, and the overseas born were more likely to purchase since 2000, while the relatively less well-off continue to drop PHI in spite of current policy incentives.

Suggested Citation

  • Stephanie Knox & Elizabeth Savage & Denzil Fiebig & Vineta Salale, 2007. "Joiners, leavers, stayers and abstainers: Private health insurance choices in Australia, CHERE Working Paper 2007/8," Working Papers 2007/8, CHERE, University of Technology, Sydney.
  • Handle: RePEc:her:chewps:2007/8
    as

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    File URL: http://www.chere.uts.edu.au/pdf/wp2007_8.pdf
    File Function: First version, October 2007
    Download Restriction: no

    References listed on IDEAS

    as
    1. Alfons Palangkaraya & Jongsay Yong, 2005. "Effects of Recent Carrot-and-Stick Policy Initiatives on Private Health Insurance Coverage in Australia," The Economic Record, The Economic Society of Australia, vol. 81(254), pages 262-272, September.
    2. Mingshan Lu & Elizabeth Savage, 2006. "Do financial incentives for supplementary private health insurance reduce pressure on the public system? Evidence from Australia, CHERE Working Paper 2006/11," Working Papers 2006/11, CHERE, University of Technology, Sydney.
    3. Denzil Fiebig & Elizabeth Savage & Rosalie Viney, 2006. "Does the reason for buying health insurance influence behaviour? CHERE Working Paper 2006/1," Working Papers 2006/1, CHERE, University of Technology, Sydney.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Farrell, Lisa & Fry, Tim R.L. & Risse, Leonora, 2016. "The significance of financial self-efficacy in explaining women’s personal finance behaviour," Journal of Economic Psychology, Elsevier, vol. 54(C), pages 85-99.

    More about this item

    Keywords

    private health insurance; Australia;

    JEL classification:

    • I10 - Health, Education, and Welfare - - Health - - - General

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